No fault insurance

Everything you need to know about no fault insurance in Canada

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What is no fault insurance?

No-fault auto insurance is when a reimbursement from any loss as a result of an insured risk is paid for by your insurer, not someone else’s. It makes the claims process faster and delivers more funds to the injured, without administrative slow downs and rising costs of the courts.

Before the no fault system, there was the tort insurance system where the driver deemed at fault in a crash was completely liable and the other driver (i.e. victim) had an opportunity to sue for damages to their car, medical care, and even replacement income.

How insurance companies determine fault

A no-fault system means you will only deal with your own insurance company, but it doesn’t mean you can’t be found at-fault. After a collision, all associated insurance companies look to the fault determination rules to determine who was at fault, or partially so. Any driver in an accident can be found from zero to 100 percent at fault depending on how the crash happened.

Even though the police conduct their own investigation, the insurance company will do their own and it’s their ruling that trumps the police when it comes to fault determination for insurance purposes. So remember when submitting a claim just because the police deemed you to not be at fault, your insurer may see things another way. They may determine that you were partially to blame and only reimburse you for a portion of your claim.

What should you do when you’re in an accident?

If you’re in a collision, make sure to get the following details and file it with your insurance provider as soon as you can (ideally, within a week of the accident). Failure to do so may result in your claim being denied. When you submit a claim, the more details the better.

At the scene, don’t admit to any fault, stay calm, and stick to the facts. If it’s a major accident, call 911 and don’t move injured people unless they are in danger. Once everyone is safe and away from traffic, here is the essential information you need after an accident:

  • The date and time of the accident
  • The location of the accident
  • Make and model of each vehicle involved
  • License plate numbers of those vehicles
  • Each driver’s name and driver’s license number (it’s possible a driver isn’t the owner)
  • Name of all the insurance companies and policies of each driver
  • Take note of any immediate injuries from the collision
  • How many passengers were involved, not just the drivers
  • Take photos of the damage done to each vehicle
  • Write down, or record on your phone how you would personally describe what happened that caused the accident
  • Once police show, make sure to get the officer’s name and badge number

For more details, read our blog, What to do after a car accident

How insurance works in a no fault system

In Canada, there are both public and private insurance systems. It is federally mandated that everyone driving a car needs insurance. The difference between the two systems is, with public insurance the provincial government offers the standard product, while private allows for competition from various insurance companies. In a private system, a driver is free to shop around for the best car insurance quote.

Unfortunately, despite the disparity, neither system can consistently claim to be cheaper than the other. Though currently the most expensive insurance in Canada is found in a public market. BC car insurance quotes took over from Ontario car insurance quotes as the most expensive in the country in 2019. BC is a public system and Ontario is private.

Be it private or public, the core elements of the insurance policies remain the same. And, each policy can be modified with add-ons or extensions to the base policy. At the core, insurance policies include:

The main components of auto insurance

Basic car insurance Overview
Third-party liability

Insurance against the risk of damaging someone else’s property and injuring another person.

Accident benefits

If you're in an accident, this pays you for medical costs, rehabilitation, income replacement, and death and funeral expenses.

Uninsured motorist

Coverage for when you’re in an accident where the other driver is at fault, but they have no insurance coverage.

Direct compensation property damage (DCPD)

In provinces where it exists, this is coverage for your vehicle and its contents if you’re not at fault.


The most common endorsements (add-ons) to auto insurance

Add-ons Overview
Collision

Protects your car if you’re in an at-fault collision with another car or stationary object like a tree or guard rail.

Comprehensive

Protects your car from perils not related to driving like vandalism, extreme weather, fire, or falling objects.

Those are the 4 core coverages that make up a standard auto insurance policy, but many drivers add additional coverage, if not already included, such as collision, comprehensive car insurance. You can further customize your policy by extending coverage limits, like increasing third-party liability up to $2 million instead of the minimum, which is usually $200,000. You can also add-on specialized coverages like accident forgiveness, conviction protector, and disappearing deductible.

What you need to know about no fault insurance by province & territory

While no fault insurance is used in every province and territory, how it works will vary slightly. In Saskatchewan, for instance, while no-fault is the default, a driver can opt for tort insurance significantly reducing your insurance premium and your potential claim amounts. Quebec’s hybrid no fault system means you’ll deal with their public insurance for accident benefits, but a private insurer if your car is damaged.

Different provinces have different accident benefits payout amounts for medical, loss of income,or death benefits. If you aren’t happy with the amounts, you can sometimes sue for more, but with limits, and sometimes you can’t sue at all. With this in mind, we decided to give an overview of each province.

No fault insurance FAQs

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